15-16 May 2008 Bratislava

Transcription

1 Alessandro Tappi Head of Guarantees & Securitisation EIF s instruments to support SME Securitisation May 2008 Bratislava SME Asset-Backed Financing This presentation was prepared by EIF. The information included in this presentation is based on figures available for August Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct.

2 Table of contents EIF at a glance Market overview EIF Approach SME securitisation Case studies The European Commission s programme (CIP)

3 1/ 24 EIF at a glance EU specialised financial institution for SMEs, acting through Guarantees for SME portfolios and Venture Capital - AAA/Aaa/AAA - MDB (multilateral development bank) status - 0% weighting (CRD/Basle II) Subscribed capital: EUR 3bn - EIB: 66% - EU: 25% -Fin. institutions:9% Aaa-rated European institution with MDB status Need to generate return on equity

4 2/ 24 EIF geographic reach EU Member States Members of EFTA (Norway, Iceland, Liechtenstein, Switzerland) Candidate and Potential Candidate Countries (Currently: Turkey, Western Balkans )

5 EIF at a glance Market overview EIF Approach SME securitisation Case studies The European Commission s programme (CIP)

6 European Market overview: volume issuance (PRIOR to CRISIS ) Funded SF issuance to 31 Aug 2007 Total issuance in 2006 exceeded EUR 450 bn was expected to be another record year. Recent events have changed dramatically the outlook (market closed). The Securitisation strategic value for originators and investors remains fully valid.

7 SME CDOs: total issuance ( ) SME CDOs issuance by country ( ) Aggreate volume: EUR bn DE AT NL/BE IT PT GR SP CEE UK SME CDOs: historically 3% - 4% of the total market; higher (up to 10-12%) in 2006 and beginning of 2007 Volumes historically dominated by Germany & Spain Growing volumes & diversity in recent years (more originators, countries, structures, asset classes )

8 European SME CDOs SME CDOs issuance by country EUR bn ( ) Funded Unfunded DE AT NL/BE IT PT GR SP CEE UK Typical structures: Germany: synthetic partially funded Spain: True Sale (fully funded) Recent developments: Growing diversity By country By asset class By structure Basel II Change in scope & Rationale Sub-prime Fundamentals Investor base

9 EIF key player in the SME CDO space Volume-based, the EIF guarantee commitments represent less than 5% of the total risk transfer in the SME CDO market. The EIF participation in Mezzanine tranches can be estimated at around 15%-20%. Higher involvement in recent troubled times

10 EIF at a glance Market overview EIF Approach SME securitisation Case studies The European Commission s programme (CIP)

11 EIF Approach: SME Securitisation Drivers for Originators Transaction rationale: Diversification in funding sources Economic and regulatory capital relief Matching repayment profiles in assets & liabilities Funding cost advantages Exit strategy

12 EIF Underwriting Criteria (1) Minimum underlying ratings Typically: BB / Ba2 Exceptionally: Ba3 and B1 External rating is NOT an EIF requirement. EIF always assigns its internal rating to the tranches guaranteed Max. amounts For mezzanine exposures: typically up to EUR 50 m, and depending on the underlying risk and total deal size Larger tickets possible more for senior positions Max. term Typically: up to 10 years WAL. Exceptionally: up to 15 years. Competitive pricing with no external costs

13 EIF Underwriting Criteria (2) Eligible countries All EU Member States Candidate and potential candidate countries (Turkey, Croatia, Western Balkans, etc.) Typical asset classes Priority to SMEs (EU definition) Middle-market companies eligible, but to a limited extent Compliance on a portfolio basis Non-SME pools (e.g. car loans, consumer loans) may also be eligible e.g. in countries where SME securitisation is less developed Originator must be committed to new SME lending

14 SME ABS Credit Enhancement Financial Guarantee Unconditional, irrevocable guarantee of timely payment of interest (at each interest payment date) and ultimate payment of principal similar to "monoline" insurer Wraps or Bilateral guarantees possible Typically BB to A rated bonds wrapped up to a AAA level Originator SPV Portfolio of loans Sale of Portfolio or Credit Default Swap AAA AA AAA AA A BBB A BBB unrated unrated AAA/Aaa/AAA Bondholders Bondholders Bondholders Bondholders EIF EIF

15 ABS Credit Enhancement Advantages for Noteholders EIF top credit quality (AAA/Aaa/AAA rating) Multilateral Development Bank (MDB) status ZERO risk-weighting under BIS II New Capital Accord for noteholders subject to banking solvency ratios Financial guarantee covering: Credit risk: timely payment of interest and ultimate payment of principal (debt service guarantee) Structural risk: including legal, performance, bankruptcyremoteness, etc., that are not covered in unwrapped AAA rated ABS Risk exposure diversification: exposure to EIF diversifies investor risk with respect to the traditional monolines

16 Advantages for Originators and Arrangers Facilitate placement and enhance liquidity of Bonds Broader investor base Quicker execution; lower transaction costs Secondary market transactions possible Dedicated EIF team of professionals with extensive experience and knowledge of the SME securitisation market Win-win situation Involvement early on in transaction, sharing ideas and providing constructive feed-back Advantageous all-in cost Competitive EIF pricing Premium uncertainty removed Relatively large underwriting and structuring capacity for smaller transactions (e.g. club deals)

17 EIF at a glance Market overview EIF Approach SME securitisation Case studies The European Commission s programme (CIP)

18 SMEs SMEs GIAC members GIAC members Origination of loans tailored for securitisation Transaction:FCC GIAC 5 (April 2004), France Seller: GIAC Portfolio : initial portfolio: EUR 28.9 m, to be ramped up to EUR 90 m) Maturity: 10 years Highlights: EIF guarantees the Mezzanine A notes for an amount of EUR 7.2 m at issue date (up to EUR 20 m): Origination tailored for securitisation GIAC GIAC Servicer Servicer Maximu m Portfolio EUR 90 m Principal & Interest Proceeds of Master Loan to Individual SMEs Crédit Agricole Crédit Agricole Indosuez Indosuez Loan Loan provider provider Sale of Master Loan FCC FCC GIAC GIAC 5 5 SPV SPV EIF EIF Issues of CLNs Proceeds External guarantor External 20% risk guarantor 20% risk weighting weighting Senior notes Senior notes Mezzanine A Mezzanine notes A notes Mezzanine B Mezzanine notes B notes SMEs Cash Reserve Contributions Reserve Fund Reserve Fund FLP FLP Crédit Crédit Coopératif External Coopératif guarantor External guarantor

19 Individual Reference Pools RBPL RBCZ Multi-country, Multi-originator, CEE ROOF Credit Default Swaps Combined Reference Pool w/o individual FLP KfW Super Senior CDS Super Senior CDS Credit Default Swaps Mezzanine Swaps First Loss Junior CDS Collateral Agreement Senior Investor Senior Investor Mezz. Inv. Mezz. Inv. Mezz. Inv. Junior Investor

20 SME Securitisation Other examples Venture Loans & Lease (e.g. Kreos II, ETV, ) Small ticket lease receivables (e.g. ROOF Raiffeisen lease PL, Millennium Lease PL,...) SME bonds (senior unsecured schuldschein) (e.g. S-Core, CoSMO, ) SME mezzanine loans (e.g. PULS, ) SME loan guarantees (e.g. RFL IT, ) Micro loans (e.g. ProCredit Bulgaria) MFI loan CLOs (e.g. Opportunity 2005)

21 SME Securitisation: there ain t just one

22 EIF Track Record in SME Securitisation As of December 2007: Cumulative guarantee commitments: EUR 4,228 m Exposure to more than 170 tranches, Mostly in the mezzanine area (*) (*) and not one default

23 EIF at a glance Market overview EIF Approach SME securitisation Case studies The European Commission s programme (CIP)

24 5/ 24 How did EIF get the CIP mandate? October 2006: European Parliament and Council Decision 1639/2006/EC establishes the Competitiveness and Innovation Framework Programme (CIP) September 2007: EC mandates the management of the CIP financial instruments to EIF Under the mandate agreement, EIF acts for the EC - all operations are funded with the CIP budget (total envelope for VC and Guarantees: EUR 1.1 bn)

25 7 / 24 Competitiveness and Innovation Framework Programme (CIP) Four different guarantees products: Loans and leases Micro credit Equity and quasi equity Securitisation

26 13 / 24 CIP SME Securitisation window (1) WHO? Implementation via guarantee schemes, banks and leasing companies Committed to SME financing and Able to comply with the requirements under the Facility, especially enhanced access to finance

27 14 / 24 CIP SME Securitisation Window (2) WHERE? All EU Member States Norway, Iceland and Liechtenstein EU Candidate and Potential Candidate Countries (as and when necessary CIP agreements with the EC are concluded)

28 19 / 24 CIP SME Securitisation Window (3) Securitisation of SME loan portfolios: cover for mezzanine and junior tranches co-investment with EIF own resources possible focus on smaller banks, new markets, multi-country and multi originator transactions Cash / synthetic transactions Term: up to 10 years Guarantee fees will be charged Enhanced access to finance: to provide new loans to SMEs ( Additional Portfolio) Other EC requirements: reporting, visibility, audit rights, etc.

29 Securitisation of SME loans Second Loss EIF (own risk) CIP New SME loans

30 22 / 24 How to apply for CIP guarantees Interested institutions must send a formal application in line with the requirements All information available on The website will be updated with further information (in case of new EU requirements, further news, announcements etc)

31 24 / 24 Contact European Investment Fund 43, avenue J. F. Kennedy L-2968 Luxembourg Tel.: (+352) Fax: (+352) People in Athens, Brussels, Istanbul, Lisbon, Luxembourg, Madrid, Paris & Rome

32 Thank you! Questions?